Bill Ackman Discusses Target (TGT) Board Plan On Bloomberg TV

May 11, 2009 4:52 PM EDT

Today, Pershing Square Capital's Bill Ackman hit the airwaves, in addition to hosting a town hall meeting, to discuss his plans to nominate himself and four others to the board of Target Corp (NYSE: TGT).

One of the interviews Ackman held was with Bloomberg TV's Margret Popper. Below is a copy of the interview.  Link to Video.

Transcript Courtesy of Bloomberg LP:

(This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.)

MARGARET POPPER, BLOOMBERG NEWS: Thanks, Carol. I am here with Bill Ackman, who is leading a proxy fight against four directors - five directors, I should say, on Target's current board. Today, he was giving shareholders a chance to vet his proposed directors.

I want to start with kind of the overall feel of this battle. It feels to me that you are not calling for anybody's head.

WILLIAM ACKMAN; FOUNDER AND CEO; PERSHING SQUARE CAPITAL MANAGEMENT LP: Correct.

POPPER: It doesn't have sort of the furor that you hear, say, when you listen to talk at Citibank or at Citigroup or at Bank of America. It is a lot of money to spend to affect incremental change. Why do that?

ACKMAN: I don't think the change would be incremental. I think we are bringing on board Jim Donald, if we are successful, who is one of the top grocery store retailers in the country. That is going to help Target. We are bringing on Richard Vague, one of the top credit card executives in the country.

We are bringing on Michael Asher, one of the top real estate investors in the country. We are bringing on Ron Gilson, one of the top corporate governance experts in the country.

We are bringing on myself, if shareholders are so kind to vote for me. I was one of the largest owners of Target. So I look at this and I say, this isn't incremental at all. I think it is major change for the company. There isn't - those disciplines are not represented on the current board.

What it’s not, it’s not like we are calling for anyone's heads. Everyone on the board is a well-regarded businessperson. A lot of them have been there a long time. A lot of boards have a habit of sort of reelecting themselves because it is a bit uncouth to kick someone off.

So we are making the extra effort. It is a lot of money, but in light of the fact we own over $1 billion of common stock, it is worth $10 million to make sure that the best people are on the board.

POPPER: How much are you spending on this project?

ACKMAN: It is going to be a number probably north of $10 million.

POPPER: $10 million. So for that -

ACKMAN: It's good for the economy.

POPPER: You are going to get seats on the board.

ACKMAN: I am not going to get seats, right? If I am elected, I will get a seat on the board and we found four independent directors who we think are going to bring a lot of value to the company.

POPPER: Who can potentially advise this company, but this board arguably has a history of not doing that or not stepping in. And you are going to have eight directors from the old board if all five of your nominees win.

ACKMAN: What I can promise you is at the new board meetings, people are going to pay a lot more attention. They are going to read their board packages very carefully. A little bit of - it lights a fire under a company to have this kind of board change.

It is not going to change the strategic direction of the company. They are going to be a little more shareholder friendly, they are going to be a little more shareholder focused. They are going to be less insular. They are going to have the benefit of fresh perspective on the board. I think all of those are very positive things. I don't think it is incremental at all.

I think it can make a major difference even to what is a very good company. You take a great company and you make sure that there is a not just a solid board filled with good businesspeople, but people who can bring specific knowledge and you can have a great stock.

POPPER: Now you have obviously introduced five new people who have a lot of relevant experience to Target and what Target does.

ACKMAN: Yes.

POPPER: One of the most controversial to my mind is Richard Vague, who he obviously has experience in credit cards, but you are putting him up against Dick Kovacevich.

If you ask people in the banking industry, he is possibly the best banker in America. So how does Richard Vague replace his skills?

ACKMAN: Sure. If I were looking for - if this were a JPMorgan and I was looking for someone to put on the board when Richard Kovacevich retires from Wells Fargo, I think he would be an excellent candidate. But this is not a bank. This is a retailer that has a credit card operation.

Wells Fargo is not a top three credit card operator. They are not known for doing partnering transactions, which is the kind of transaction that we'd like Target to do. Credit cards are very specific expertise.

Richard Vague built, operated and sold one of the most profitable, fastest-growing credit card operations in the country. And he has done it twice. He did it with Jupiter Financial.

So I think the board has had the benefit of Richard Kovacevich for 13 years. The board had made the decision to pursue the credit card transaction they did, which in our view, was sub-optimal. At the end of the day, we think Richard should have - he would have been the voice on the board that people listened to the most. I think he probably had the most influence on what the company ultimately did.

In our opinion, it was an error. The company should have done a partnered transaction where they shifted credit risk and funding risk, not just a financing transaction, which is effectively what they did.

POPPER: Now the company claims in rebuttal to your arguments that they did shift substantial risk.

ACKMAN: They shifted some substantial funding risk, but they didn't shift substantial credit card risk. The company is still exposed to a first loss on every cardholder in their portfolio.

POPPER: So what is your vision here? You want them to not exit the card business entirely?

ACKMAN: No, no, no. Target should continue to have a Target Visa card. It should continue to control the call center, the marketing, the customer acquisition, but they shouldn't - there is a continuum of the kinds of transactions they can do.

We want them to do a transaction where the funding risk is shifted entirely to a bank and where the underwriting decision is pushed sufficiently to a bank that they are willing to assume the credit risk.

POPPER: Now one of the other arguments that the company makes is that you won't see the P/E multiple expansion from this move that would substantiate your ideas on both credit cards and the real estate proposition.

ACKMAN: Look, I happen to disagree with the company. I think I know more about the valuation of Target than the management does. This is what I do for a living. What I do for a living is just figure out what businesses are worth and where stocks should trade.

So I think that's actually a place where I can bring some expertise to the board that is also lacking. There isn't a public equity investor on this board and I think I can help them in that regard.

But I think it is inarguable that bringing on directors with relevant expertise is going to be helpful and bringing on directors that don't have any - almost every one of Target's directors on their slate does business with the company.

Wells Fargo does business with the company, McDonald's does business with the company, the portfolio companies Clayton, Dubilier, which are George Tamke's firm, do business with the company.

So they are all, they've got - is that conflict a big enough conflict to cause them to do the wrong thing? I don't think they do the wrong thing, but at least to a certain stasis, staleness on the board. And the new directors that we propose are going to have fresh ideas and they are not going to be afraid to challenge the status quo if they think they have a better idea.

POPPER: Seems to one of the key guys on the group that you are proposing is Jim Donald, who has this tremendous retail expertise, was at Starbucks, was at Wal-Mart, understands the big bucks, understands food.

ACKMAN: Yes, that’s right.

POPPER: Tell me about how you got him.

ACKMAN: Jim Donald was recommended by the head of retail investment banking at UBS, who is someone we have a relationship with. He said, “did you call Jim Donald? I think he would be interested.” And we called Jim Donald, he flew to New York a week later. I met him, and you had a chance to meet him, and the guy clearly knows what he is talking about.

I thought he would be very value-added. He joked, he said, “look, Greg knows me, he is going to kill me when I do this, but I think it is the right thing for Target so I am going to do it.” And you have got to respect a guy who says something like that.

POPPER: Now you said this was not my slate, this was not my group.

ACKMAN: Right.

POPPER: But you did kind of carefully pick these people to address the issues.

ACKMAN: I found the best people I could. When I say they are not mine, these are not my henchmen, right? These are very independent businesspeople. These are all people that are independently, again, I don't know Ron Gilson’s finances, but these are people that are very financially independent. They don't need Bill Ackman. They make up their own mind.

They are doing this because it interests them, because they think they can add value, and they are going to make the right decision. I don't know that I am always going to agree with the decisions they make. But I am confident in deferring to the advice of smart, independent, successful people with relevant experience.

POPPER: Now when you look at this team, you have obviously been canvassing shareholders trying to get support. What is your sense of how they are being supported by the shareholder base? Are you going to get all of them in? What is your hand in -

ACKMAN: The answer is, the next two weeks are where the rubber meets the road. I will have a lot more information for you as we get closer to the election. Very few people are willing to tip their hand at this point. They are still collecting data and we have a lot of meetings scheduled. I am going to be on the road for the next -

POPPER: Can you tell me some of the size shareholders you meeting with, some of the names?

ACKMAN: Well, we are going to see or speak to every major shareholder of the company.

POPPER: Okay.

ACKMAN: And hopefully, a lot of them were listening today. We had something between 600 and 700 already have seen the webcast, watched it real time, and then we are going to have a lot of downloads.

So I think we are going to reach the shareholder community and I think as word gets out about, I think this went very well today. I think we really got a sense of the people and -

POPPER: Just finally, we have got 30 seconds.

ACKMAN: Yes?

POPPER: You haven't been on boards before. You are now looking at Target and possibly GGP.

ACKMAN: General Growth.

POPPER: General Growth.

ACKMAN: Sure.

POPPER: Why -

ACKMAN: Actually, I have been on boards before. But not in Pershing context. Why here? Because I think that I personally can add a lot of value at Target.

We have been a major investor and we have created value in a lot of retailers and consumer brand franchises - Sears, McDonald's, Wendy's, Long's Drugs. It is our largest investment and I would like to see it be successful. I think I could bring a lot of value to the company.

POPPER: All right.

ACKMAN: Thank you very much.

POPPER: Thank you very much, Bill.

ACKMAN: Sure.

POPPER: That was Bill Ackman of Pershing Square Capital, talking about how he wants to get on the board of Target and help protect his investment in the company. Back to you, Carol.

***END OF TRANSCRIPT***

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